Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
957749 | Journal of Economic Theory | 2007 | 22 Pages |
Abstract
In stochastic OLG exchange economies, we show that short-memory equilibria-the natural extension from deterministic economies of steady states, low-order cycles, or finite state-space stationary sunspots equilibria-fail to exist generically in utilities. As a result, even with independent and identically distributed exogenous shocks there is serial correlation in endogenous economic variables in equilibrium. This arises even if utilities are time-separable, some goods inferior, and there are no technological lags. Hence, the origins of economic fluctuations can be traced only to the demographic structure of a heterogeneous agent, multiple-good economy.
Related Topics
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Economics and Econometrics
Authors
Alessandro Citanna, Paolo Siconolfi,